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31 Cards in this Set
- Front
- Back
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18.73C - Advantages of ETFs (6)
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1. Effcient method of diversification
2. Shares can be traded intraday, shorted, and margined 3. Underlying assets are published daily 4. Low expenses 5. In-Kind creation and redemption of shares keep premium and discount to a minimum 6. Less capital gains liability compared to open-end funds |
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18.73C - Risks of ETFs (6)
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1. Exposure to market risk of index tracked
2. Class or sector risk for ETF's that invest in specific portions of the market. 3. Prices can differ from NAV 4. Tracking error risk 5. Leverage and credit risk for ETFs that use derivatives 6. Currency and country risk for ETFs based on international indexes |
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17.73D - 4 Forms of real estate investment
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1. Outright ownership
2. Leveraged equity positions 3. Mortgages 4. Aggregation vehicles such as limited partnerships & REITs |
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17.73D - Why is real estate valuations difficult (4 characteristics)
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1. Immobile
2. Indivisible 3. Somewhat Illiquid 4. Each property is unique |
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17.73E - Approaches to real estate valuation (4)
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1. Cost approach
2. Sales comparison approach 3. Income approach |
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17.73F - The sales comparison approach of real estate begins with...
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Recent sales prices for comparable properties and makes adjustments for differences.
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17.73F - the income approach begins with a...
NOI for a real estate investment? |
A calculation of NOI and divides by the required rate of return. (the cap rate)
+gross potential income - vacancy and collection loss estimate -insurance -real estate taxes - utility expense - estimated maintenance expense ______________________________ =NOI |
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17.73F - The Discounted after-tax CF model
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Annual NOI is adjusted for specific financing CF's and computed on an after-tax basis using the investor's marginal tax rate
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17.73F - With the discounted after-tax CF model, annual NOI is adjusted for
* The NPV of the investment is the... *** The yiel dof the investment is the |
Specific financing CF's and computed on an after-tax basis using the investor's marginal tax rate
PV of these after-tax CF's based on the required rate of return. ***The yield of the investment is the IRR of the aftr-tax CF's based on the purchase price of the property |
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17.73G - The stages of venture capital investing are: (4)
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1. Seed stage
2. Early stage 3. Formative stage 4. Later stages (after the company is making/selling a product) There later stages are alternatively called second stage, third stage (to fund a major expansion), or Mezzanine/bridge financing (in preparation of an IPO) |
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17.73G - third stage
- Mezzanine/bridge financing |
(to fund a major expansion), or
(in preparation of an IPO) |
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The net asset value of investment copmany (mutual fund) is the
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NAV is the value at point in time, of fund assets minus fund liabilities divided by the # of shares outstanding
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MF's have what fee that can adversly affect performance?
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management fees
- administrative fees -marketing fees |
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An open-end fund will
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create new shares upon purchase or redeem existing shares for cash
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A closed end fund
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has a fixed # of shares that trade like shares of stock
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A stable value fund..
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Invests in short-term gvrnmt securities or other investments that can provide timely principal payments and a set interest rate
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Venture capital investment characteristics (4)
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- illiquid
- have long horizons - have limited comparable historical data - require substantial input from investor |
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What is difficult for venture capital investment
Due to |
Valuation/performance measurement
Because of problems in estimating failure, the payoff at exit (sale or IPO of the firm), and the timing of the exit |
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Describe major hedge fund categories:
1. Long/Short 2. Market neutral 3. Global macro 4. Event Driven |
1. to benefit from overpriced securities (L/S)
2. to hedge market risk (MN) 3. To profit from trending factors (global macro) 4. Event driven (to exploit unique opportunities) |
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Risks of hedge fund investing
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- illiquidity
- counterparty risk -pricing/valuation problems -settlement errors -possible margin calls |
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Hedge funds have typically what risk/return characteristics
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lower std. dev / higher sharpe ratios / low correlation of returns with those of conventional asset classes
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HF performance may be biased upward because of ...(6)
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Self-selections bias, backfilling bias, survivorship bias ,smoothed pricing of assets that trade infrequently, option-like investment strategies, and gaming based on fee structures
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Databases of HF performance will be biased ______ on performance and ______ on risk measures
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Upward (poor-performers cease to exist)
Downward (riskier strategies are more likely to cease to exist) |
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17.73M - What can affect the valuation of 'closely held' companies
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-Legal structure (S corp. or partnershp)
-absence of SEC reporting requirements -the purpose of the analysis -the valuation methods accepted in its specifc legal jurisdiction |
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Valuation of closely held companies can be done what three ways
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1 .Cost method
2 .Comprables method 3. Income approach |
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Closely-held companies: When the chrctrstcs of the subject security differ in (what) dimensions from characteristics of the securities used to establish a base value what adjustments can be made
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Discounts for lack of liquidity, for a minority position, and a premium for controlling intesrest are applied when they differ in chrctrstcs
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Investing in distressed securities is like
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Venture capital investing (invstmnts often illiquid, w.long time horizon, require extenseive valuation analysis, and can requite active participation in dealing with mgmt. or with court-appointed trustee in case of firm in bankruptcy reorganization
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Indirect investment in commodites can be achvd through
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1. futures
2. commodity-linked bonds 3. shares of commodity-producing firms in order to gain exposure to commodity price gains associated w/higher economic growth |
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17.73Q - While a passive investor may invest in commodities for .....
Contrast with an active investor |
Diversification benefits through a collaterilzed futures fund
** Active Invst: seeks to profit from anticipating moves in commodity prices and is more likely to use futures |
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Commodity-linked securities are used by investors who want...
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Exposure to commodity price moves for either hedging or speculation
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A collateralized commodity futures position involves..
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Investing in futures along with an investment in treasury securities equal to the value of the futures contact and will have returns from futures price changes and from intst income of the Treasuy position
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